Identify which of the following factor does not affect working capital requirement ?

Diversification

The correct answer is option (4) : Diversification

Factor affecting the requirement of working capital

• Production cycle : Production cycle is the time span between the receipt of raw material and their conversation into finished goods
• Seasonal Factors : Most business have some seasonality in their operations. In peak season, because of higher level of activity, larger amount of working capital is required
• Credit allowed : Different firms allow different credit terms to their customers. These depend upon the level of competition that a firm faces as well as the credit worthiness of their clientele.

Factors affecting the requirements of fixed capital

• Diversification : A firm may choose to diversify its operations for various reasons, with diversification, fixed capital requirements increase